Millions of Americans are ditching their day jobs in pursuit of starting a business that will bring them more happiness, fulfillment and—hopefully—more income. However, starting a successful business is no easy feat. In an era where the cost of living is skyrocketing and wages remain stagnant, the challenges are manifold. Even the decision of which state to start a business in, such as forming an LLC, can significantly influence your odds of success.

To rank the best states to start a business in 2024, Forbes Advisor analyzed 18 key metrics across five categories to determine which states are the best and worst to start a business in. Our ranking takes into consideration factors that impact businesses and their ability to succeed, such as business costs, business climate, economy, workforce and financial accessibility in each state.

It’s important to note that these rankings are a guide, not a definitive answer for every individual business. Entrepreneurs should consider their specific business model and needs when choosing a location, as a state’s ranking may vary based on industry and personal circumstances. Furthermore, these metrics represent a snapshot in time and can evolve, so staying informed about ongoing economic and regulatory changes in your chosen state is crucial.

Why You Can Trust Forbes Advisor

Forbes Advisor’s in-house team of data analysts and editorial experts used 10 credible data sources to create our state ranking report based on 18 metrics. Our sources included the most recent data from the Bureau of Labor Statistics, the Tax Foundation, the Department of Labor and the Bureau of Economic Analysis.

  • Eight Government Resources Used
  • Three Levels of Fact-Checking

Key Takeaways

  • Overall best state to start a business: North Dakota ranks as the top choice for launching a business in 2024. Its strong business climate, low cost of entry and funding opportunities make it an optimal location for new ventures.
  • Overall worst state to start a business: Vermont is at the bottom for starting a business. Factors such as startup costs, business climand potential obstacles for startups mark it as a less favorable option.
  • Best and worst states by business survival rates: California leads with a high business survival rate of 81.5%, reflecting a thriving business environment. Conversely, Washington struggles with the lowest survival rate at 59.2%.
  • States with the highest and lowest cost to register a business: Kentucky is the most budget-friendly state for business registration, charging only $40. In contrast, Massachusetts requires the highest fee of $500, posing a significant initial cost for startups.
  • States with the most promising workforce: Massachusetts is notable for its educated workforce, with 46.65% holding a degree. Colorado and Vermont also excel in this area. Colorado additionally has the largest proportion of working-age population at 67.4%, closely followed by Massachusetts and California at 66.4%.

The Five Best States To Start a Business in 2024

1. North Dakota

North Dakota holds the top position from 2023 and remains the best state for starting a business in 2024. Its business environment is notably welcoming, with a formation fee of just $135, making the entry barrier for new businesses relatively low. This fee is an important consideration for entrepreneurs who are mindful of initial expenses. The state’s business survival rate, sitting at a healthy 77%, reflects a supportive and resilient environment where businesses have a better chance of thriving.

This state’s appeal is enhanced by a cost of living index at 0.94, lower than the national average, and a significant portion of its population, 64%, falls within the working-age range. These factors, along with its perfect scaled score of 100, highlight North Dakota’s comprehensive suitability for new businesses, combining economic feasibility with a robust labor market. The state not only offers financial incentives but also provides a solid foundation for workforce development, ensuring businesses have access to a skilled and able workforce.

2. Indiana

Indiana ranks second in 2024 as a highly favorable state for starting a business. Its business-friendly environment is highlighted by a modest formation fee of $100, lowering the barrier to entry for new companies. The state also maintains a solid business survival rate of 77%, reflecting a stable and nurturing environment for business growth. Additionally, the average funding available for a small business in Indiana is notable, standing at $24,502, which signifies a supportive financial environment for entrepreneurs.

The economic appeal of Indiana extends beyond business statistics. The state boasts a cost of living index of 0.91, notably below the national average, making it an economically attractive location for both business owners and their employees. The demographic makeup of the state further adds to its attractiveness, with 64% of its population in the working-age bracket, indicating a substantial labor pool. All these factors contribute to Indiana's impressive scaled score of 98 out of 100, making it an excellent choice for business ventures.

3. Arkansas

Arkansas is a highly advantageous state for starting a business, marked by several notable factors. The state offers an exceptionally low business formation fee of just $45, one of the lowest in the nation, which eases the initial financial burden for new businesses. Arkansas has a business survival rate of 78%, suggesting a supportive environment that aids in sustaining and nurturing new enterprises.

It’s equally supportive of small businesses, offering an average of $23,463 in funding through grants and other programs to each, reflecting a commitment to entrepreneurial growth. The state also boasts a cost-effective living environment, with a cost of living index of 0.89, lower than many other states. This economic efficiency extends to both businesses and employees. Coupled with a workforce where 64% are of working age, Arkansas provides a fertile ground for new businesses, balancing affordability with a ready labor pool. Its scaled score of 93 out of 100 further attests to these qualities.

4. South Dakota

South Dakota presents a compelling case for entrepreneurs, combining several key attributes that help foster business growth and success. The state's formation fee is set at $150, balancing affordability with access to a range of business services. A noteworthy aspect of South Dakota's business environment is its survival rate of 74%, which points to a supportive atmosphere for maintaining and developing new businesses.

The financial support for small businesses in South Dakota is particularly strong, with an average of $32,477 available per business, indicating a healthy investment in business growth via grants and other programs. The state's cost of living index is 0.92, less than the national average, which suggests economic advantages for both businesses and their employees. Additionally, 62% of South Dakota’s population is of working age, providing a reliable labor force. With a scaled score of 85 out of 100, South Dakota demonstrates a well-balanced mix of affordability, business support and workforce readiness, making it a favorable location for new business ventures.

5. North Carolina

North Carolina offers a blend of supportive business elements. The state's formation fee is reasonably set at $125, striking a balance between accessibility and quality service. A significant advantage for entrepreneurs is the business survival rate of 77%, suggesting a nurturing and stable environment for startups. This rate reflects the resilience and potential for growth of businesses in the state.

Financially, North Carolina is poised to aid small businesses, offering an average funding of $22,019 via grants and incentives. This level of support shows the state's investment in fostering entrepreneurial ventures. The cost of living index here is 0.96, aligning closely with the national average and ensuring affordability for business owners and workers alike. With 65% of its population in the working-age category, North Carolina provides a large labor pool. The state's scaled score of 84 out of 100 reflects these combined advantages, making it a practical and promising location for new businesses.


State-by-State Ranking: The Best States To Start a Business

Our comprehensive table provides a detailed state-by-state overview, essential for entrepreneurs considering where to launch their businesses. This ranking encapsulates a variety of factors, including population demographics, tax considerations, the rate of small business growth and the availability of funding. The data set digs into specifics such as income tax, corporate tax, property tax, formation fees and average funding per small business, alongside broader economic indicators such as GDP per capita and the cost of living index. Each state’s ranking is informed by a nuanced consideration of these elements, reflecting its unique business environment and potential for entrepreneurial success.


Conclusion

The choice of location is pivotal in starting a business. Each state presents a unique combination of challenges and opportunities, shaped by its economic climate, regulatory environment and the availability of resources for businesses. This comprehensive analysis of the best states to start a business in 2024 offers valuable insights into various factors that can impact the success of a venture.

For those considering a limited liability company (LLC), Forbes Advisor provides a wealth of information to guide you through the process. Understanding the nuances of LLC formation is essential, and resources such as our Best LLC Services offer detailed insights into selecting the right service for your business needs.

Additionally, the practical steps involved in setting up an LLC are covered in our guide on How To Start an LLC in 7 Steps. This resource simplifies the process, providing clear and actionable advice.

For a broader perspective on initiating a business venture, our guide on How To Start a Business digs into essential aspects such as market research, business planning and funding. This guide serves as a vital tool for translating business ideas into successful enterprises.


Methodology

To determine the best and worst states to start a business, the Forbes Advisor team examined 18 metrics across five categories: Business Costs, Business Climate, Financial Accessibility, Economy, and Workforce. Each metric was given an individual weighting to provide every state a score scaled out of 100.

Business Costs: 30%

This metric includes income tax, corporate tax, and property tax rates as of January 1, 2022 from The Tax Foundation. Formation fees for each state came from Forbes Advisors research, the minimum wage in each state from the Department of Labor, and the number of natural disasters from the Federal Emergency Management Agency (FEMA) as of 2022.

  • Income Tax (3 points)
  • Corporate Tax (3 points)
  • Property Tax (3 points)
  • Formation Fee (9 points)
  • Minimum Wage (9 points)
  • Number of Natural Disasters (3 points)

Business Climate: 20%

This metric uses data from the Small Business Administration (SBA) State Profiles to find the total net increase or decrease in businesses since 2020. We’ve used data from the Bureau of Labor Statistics for business survival rates. We used data from the SBA to divide the number of businesses in each state by the number of small business administration locations in each state to determine the availability of SBA locations for business owners in 2023.

  • Total Growth in Small Business Since 2020 (8 points)
  • Business Survival Rate (8 points)
  • Number of Businesses per Small Business Administration Location (4 points)

Financial Accessibility: 20%

For this metric, we used data from the Small Business Administration State Profiles to calculate the total amount of business funding available in 2021.

  • Average Funding (20 points)

Economy: 15%

The metric used data from the Bureau of Economic Analysis to find personal expenditures per capita in 2021. We used Statista to find the gross domestic product per capita and the cost of living index in each state.

  • Per Capita Personal Expenditures (6 points)
  • Gross Domestic Products per Capita (3 points)
  • Cost of Living Index (6 points)

Workforce: 15%

For this metric, we used data from the Bureau of Labor Statistics to find the unemployment rate in each state and the percentage of workers that have earned a degree. Using data from the Census Bureau, we calculated how many people in each state are of working age (between ages 15-64). We calculated the number of universities per capita by utilizing data from the National Center for Education Statistics for the total number of degree-granting institutions in each state.

  • Unemployment Rate (4.5 points)
  • Percent of Population that is of
  • Working Age (4.5 points)
  • Percent of Degree-level Workers (3 points)
  • Number of Universities and Colleges Per Capita (3 points)